Corporate Britain walks a thin line between promoting good governance and post-Brexit city vibrancy.
The dangers of ignoring the regime are clearly demonstrated in The Hutt Group (THG), which suffered a share price drop from a peak of 807p in September 2021 to just 182.9p in the latest trading.
Other victims of the governance deficit include online fashion group Boohoo, which found it necessary to bring on former High Court judge Brian Leveson to oversee supply chain reforms.
In general, when there is a strong delivery of earnings and dividends, investors are often inclined to look at a weaker regime.
This is until it emerges that the accounting should be less robust and has questionable behavior.
In many ways, Britain’s strict governance system should be a plus for the city.
But the promoter of better governance, the Financial Reporting Council (FRC), notes that transparency requires more than a broad-brush declarations.
Among the serious drawbacks are the weak targets of executive pay. An example would be a potential £100m bonus for Michael Murray, Mike Ashley’s future son-in-law at Fraser Group.
It is based on the share price alone rather than on the values and purpose of the owners of Sports Direct. The FRC also finds a lack of focus on internal controls and risk management.
Among the myriad difficulties for Matt Molding at THG is the conflict of interest between his personal role as a landowner for the company and being its controlling shareholder.
He has so far shown an inability to provide clarity to skeptical investors of how his tech platform Ingenuity’s revenue is calculated.
Another area that the FRC wants to see tightened up post-Covid is the broad responsibilities of companies (as outlined in the City Code and Company Law) reporting on a range of issues related to stakeholders, the economy and society.
A major reason cited firms oppose private equity buyouts is that much of what the new owners do, good or bad, is largely done behind high walls.
The interests of consumers, co-workers, suppliers, taxpayers and society in general can be better protected if the cited companies provide best-in-class reporting on all of these issues as well as climate change.
This would then make it much easier for the big battalion investors – if they can sway themselves, the advisors and the promoters – to ensure that the feet of the buyers are kept under fire.
What is currently a disorganized system is easily circumvented with fairly meaningless promises, such as maintaining headquarters in the UK or its territories, job guarantees and much more.
There is no formal standard to judge these cases, so the social implications are barely discernible.
The FRC is intensifying surveillance. How much better if it had the full force of law in the form of a proposed audit, reporting and governance authority in its dilapidated house.
When it comes to the UK energy market you have to be careful what you wish for. Theresa May’s government imposed a cap on energy prices in response to a similar earlier idea by then Labor leader Ed Miliband.
The idea was to limit consumers’ exposure to volatility in the wholesale market.
The hat is wreaking havoc now. Prices may be capped temporarily but the option is disappearing before our eyes.
Minnows has joined the exodus following burnout at Orbit and Antis Bulb, which is now being prepared with a £1.7bn taxpayer debt.
This could potentially have been avoided if politicians had taken the personal advice of executives from regulator Ofcom, which wanted to adjust a sliding cap every month or quarter as wholesale prices changed. This would have eased the pressure on players with weak capital.
The danger now is a return to the status quo, when the big six markets again destroy choice.
The London Stock Exchange keeps a better eye. Frankfurt-based rival Deutsche Börse is upping its game by extending its opening hours to 10 p.m. local time to coincide with the closing bells on Wall Street.
Professional investors have access to alternative trading platforms after the closure of the London and Continental Exchanges. It is not easily open to global retail investors who are showing increasing interest in equity markets.